Analyst says Chesapeake directors and CEO should be replaced
Argus analyst Philip H. Weiss on Friday said Oklahoma City-based Chesapeake Energy Corp. should replace its directors and CEO Aubrey McClendon.
When we consider the full financial picture at Chesapeake, including its high debt levels (both on- and off-balance-sheet), its use of financial engineering, the relatively low quality of its financial data, the questionable nature of some of the CEO’s transactions with the company, and the apparent unwillingness of the board to put a stop to at least some of these practices, we believe the best thing for investors would be to replace the board and/or the CEO,” Weiss wrote in an analyst report released Friday.
Weiss lowered his rating on Chesapeake to “sell” from “hold.” He also suggested the company end its Founders Well Participation Program. Under the program, McClendon can personally participate in a 2.5 percent stake in every well Chesapeake drills. The program has been previously disclosed. This week’s controversy centered around up to $1.1 billion in previously undisclosed loans McClendon has received using the stake in the wells as collateral.
We have long noted our unfavorable view of (Chesapeake’s) Founders Well Participation Program…The company claims the program better aligns the interest of its CEO with shareholders. We strongly disagree. If this were truly the case, we think more companies would have similar programs.”
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